FROM THE PRESIDENT’S DESK

It is with great regret that I inform members that Mr Darren Farnham has resigned from the NSWROA Committee due to his work commitments at Network 10.

As members would be aware, Darren has been the driving force behind our flagship event, Racing’s Night of Champions (RNOC) in recent years, having undertaken the role of Dinner Chairman for two years. Darren relinquished the RNOC Dinner Chairman role this year but served on the RNOC Organising Committee and continued to control the production side of the event.

Those of you who were either at Racing’s Night of Champions or saw it “live” or on replay on TVN will know what a great job he did. Darren’s skill and expertise is without peer.

It goes without saying that he will be sorely missed and on behalf of my fellow Directors we wish him all the very best in his future endeavours.

The Association is hopeful that in years to come, Darren may be involved on the Committee again.

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LET’S WELCOME IN FRIDAY NIGHT RACING AT CANTERBURY PARK – 24 SEPTEMBER 2010

A reminder to members that the Association will be conducting a cocktail function to “Welcome In Friday Night Racing” at the first ever Friday night race meeting in Sydney on Friday, 24 September 2010 at Canterbury Park Racecourse. A truly historic occasion!

The function will take place in the Directors Room, which is situated right in front of the Winning Post, and has its own private lift entry and private tote facilities.

The cost of the function is $50.00 per person which includes free admission to the track, a race book and a mouth watering cocktail menu which includes:

  • Mini beef burger with tomato relish
  • Prawn and aioli tart
  • Lamb skewer with minted yoghurt
  • Shoe string fries and lemon pepper flathead
  • Peking Duck pancake with hoi sin and peanut sauce
  • Vegetarian rice paper rolls
  • Bambino assorted cones
  • Tea, coffee and chocolates

There will also be a cash bar available.

If you are interested in attending, please complete the attached booking form and return to the NSWROA office by Friday 17 September 2010 by:

Email: nswroa1@ozemail.com.au;
Facsimile: 9299 3212 or
Post: GPO Box 1506 Sydney NSW 2001.

WINNERS ARE GRINNERS

A WINNER – there are no better words for an owner to hear!

As members are aware, as part of our membership renewal process, NSWROA requested members to forward the names of their racehorses in order for us to acknowledge their racing triumphs in our publications.

The listing under comprises wins recorded in New South Wales as well as Australian black type successes which are recorded in bold type.

Accordingly, hereunder are the lucky NSWROA members who had winners in August 2010:

 
Owner Meeting Horse
P Aalto Sapphire Coast Etoile Vitesse
J Allen Newcastle Belle Maher
G Altomonte Canterbury Longlea
Randwick Pureness
Ms H Ayres Goulburn You Can Call Me Al
Sapphire Coast Etoile Vitesse
M Barsley Sapphire Coast Etoile Vitesse
G Besgrove Sapphire Coast Etoile Vitesse
N Bracks Canterbury Kasalingi (NZ)
F Casarotti Newcastle Palace Coup
B Chan Canterbury Kasalingi (NZ)
M Clift Goulburn You Can Call Me Al
F & Mrs C Cook Canterbury Needwood Lad (GB)
Hawkesbury Mutawarath (IRE)
C & Mrs M Conners Randwick Conahan (NZ)
M Continibali Flemington Elusive Touch
S Cottle Sapphire Coast Etoile Vitesse
M Crismale Hawkesbury Zakumi
M Einfeld Canterbury Kasalingi (NZ)
B English Sapphire Coast Etoile Vitesse
C English Sapphire Coast Etoile Vitesse
Ms J Evatt Cowra Zassi
G Fraser Goulburn You Can Call Me Al
Mrs K Fraser Goulburn You Can Call Me Al
A Frogley Gosford Emperor Big Nose
Muswellbrook Emperor Big Nose
D Fuller Warwick Farm Metal Bender (NZ)
Ms S Grant Goulburn You Can Call Me Al
G Gurney Sapphire Coast Etoile Vitesse
D Hall Canterbury Mr Edison
G Harvey Canterbury (2) Landlocked (NZ)
Miss Campbell
Goulburn Military Secret
Randwick Slow The Flow
Rosehill Verballed
Warwick Farm Illuminates
Wyong Hot Rocks
W R Haylen Cowra Zassi
S Heffernan Sapphire Coast Etoile Vitesse
Ms J Henning Randwick Private Label
Mrs J Ind Cowra Zassi
J Jackson Hawkesbury Mutawarath (IRE)
W & Mrs P Jacobs Hawkesbury Outofafrika
D Jeffery Goulburn You Can Call Me Al
Sapphire Coast Etoile Vitesse
Mrs C Jeffery Goulburn You Can Call Me Al
Sapphire Coast Etoile Vitesse
P Johnston Sapphire Coast Etoile Vitesse
Laurel Oak B'stock Goulburn You Can Call Me Al
Sapphire Coast Etoile Vitesse
R Lees & L Hoyle Lismore Peterswood (NZ)
Lismore Waterbury
His Excellency Nasser Lootah Hawkesbury Al Aseel
B Mackie Sapphire Coast Gelderbelle
K Maurer Hawkesbury Outofafrika
B McHugh Coffs Harbour Ollie Vollie
J Middleton Canberra Skateboard
Canterbury Dancing Doll
L Mihalyka Goulburn You Can Call Me Al
Sapphire Coast Etoile Vitesse
N Mitchell Taree Peppergaze
N Moraitis, AM Hawkesbury Maluckyday (NZ)
Randwick Love Conquers All
A J Moulding Grafton Chenkajest
Taree General Redoute
Dato Tan Chin Nam Caulfield So You Think (NZ)
B O'Brien Hawkesbury Outofafrika
Patinack Farm Racing Syndicate Newcastle Middlemount
  Newcastle Saint Encosta
J Poot Randwick Gazza Guru
Ramsey Pastoral Company Caulfield Panipique
D Rex Narromine Orpenitcanappen
M Sanderson Sapphire Coast Etoile Vitesse
Sheikh Mohammed Canterbury Malbun
Gosford Erewhon
Goulburn Glove
Hawkesbury (4) Barriers
Byzantine
Radar
Quidnunc
Kembla Chart
Randwick Classic Guitar
Randwick Obsequious
Warwick Farm Blackball
Warwick Farm Parables
P Silvestro Flemington Elusive Touch
R Smith Sapphire Coast Etoile Vitesse
S Snape Sapphire Coast Etoile Vitesse
D Stoddart Sapphire Coast Etoile Vitesse
Stratheden Stud Rosehill Snow Alert
W Sweeney Wyong Mr Ponzi (NZ)
J Thompson Randwick Fibrillation
S van Eyk Newcastle Palace Coup
J Vial Sapphire Coast Etoile Vitesse
G Vines Sapphire Coast Etoile Vitesse
M Walcott Canberra Skateboard
T W, Mrs D, J W & Miss H Wallace Cessnock National Gift
G Williams Canberra Zulita
Mrs V Williams Canberra Zulita
Gosford Champagne Dynamite
Randwick Military Gal
T Zwegers Sapphire Coast Etoile Vitesse
 

Another feature in the Newsletter is the 2010/2011 NSWROA Member’s Black Type Honour Roll which acknowledges the success of members in the black type arena.

The Honour Roll, as at 31 August 2010 is as follows:

 

2010/2011 NSWROA Members Black Type Honour Roll
Current to 31 August 2010

Race Name Horse Owner
G2 AJC Warwick Stakes Metal Bender (NZ) D Fuller
G2 MRC Memsie Stakes So You Think (NZ) Dato Tan Chin Nam
G3 AJC Missile Stakes Love Conquers All N Moraitis, AM
G3 AJC San Domenico Stakes Obsequious Sheikh Mohammed
G3 AJC Silver Shadow Stakes Parables Sheikh Mohammed
G3 AJC Up and Coming Stakes Blackball Sheikh Mohammed
LR VRC Aurie's Star Handicap Elusive Touch P Silvestro & M Continibali
LR MRC Quezette Stakes Panipique Ramsey Pastoral Company
LR AJC Toy Show Quality Hcp Illuminates G Harvey
LR STC Premier's Cup Snow Alert Stratheden Stud

What great results! Congratulations to all! Don’t forget to forward the names of your racehorses to the NSWROA office.

2010 RACING’S NIGHT OF CHAMPIONS

Our thanks to all who attended 2010 Racing’s Night of Champions. What a night!

As advised previously, as a small gesture to say thank you to members who purchased tickets to our flagship event, a post event draw was conducted to win two FREE TICKETS to the 2011 Racing’s Night of Champions.

I am very pleased to announce that Katherine Pinczuk was the winner of the draw. Our congratulations to Katherine.

My thanks to NSWROA Life Member Mr Noel Bracks who officiated at the draw which was conducted in the NSWROA office on Thursday, 9 September 2010.

I advise that Photo Galleries from 2010 Racing’s Night of Champions now appear on the NSWROA website www.nswroa.com.au.

MINIMISING THE RISKS OF OWNING TWO YEAR OLDS

Our good friend and corporate partner Gow Gates Insurance Brokers, have kindly prepared the following advice, via Kingsley Edwards, B.Agr.Ec (Syd.), Dip.Fin.Serv. (Ins. Broking), ANZIIF (Snr. Assoc.), C.I.P., for members:

The first two year old races of the new season will be held shortly, so now is an appropriate time to review the risks associated with owning two year olds and how such risks can be minimised.

Whether a horse performs successfully as a two year old is only known once the horse’s ability is tested on the track, however to be given the best possible chance of achieving race success, the horse must remain sound and free from injury and/or illness.

Placing your two year old in the care of a professional and respected trainer with high quality facilities who have access to specialist equine vets is a key to preventing illness or injury occurring in the first place as well as reducing the impact if such problems are suffered.

Although this is an effective approach, the introduction of a two year old to a training stable involves numerous new and different experiences. Adjusting to the stable environment and routine, particularly regular trackwork and racing for the first time which places athletic stress and exertion on these young and still growing horses, create an unique set of inherent risks. As a consequence, the incidence of injuries or illnesses in racehorses is at its highest in their two year old year. Unfortunately, in some instances, these result in the horse dying or being euthanased.

The standard mortality insurance policy for racehorses mitigates the financial loss of the owner in such circumstances. Death of the horse due to accidental injury or illness is covered as well as humane destruction and extends to include this occurrence when the horse is being transported anywhere within Australia plus when undergoing surgery conducted by a qualified veterinarian under local or general anaesthetic.

The policy is intended to place the owners in the same financial position after the loss as before the loss. It therefore indemnifies the policyholder for loss of their asset by paying them the horse’s fair market value in order to allow them to replace the horse. The premium paid by the owner for the insurance policy is calculated as a percentage of the Sum Insured (which is the maximum amount the policy will pay out provided it is less than or equal to the fair market value). The policy does not cover all causes of death such as malicious acts or pre-existing injury/illness, however it does provide compensation to the owner in most cases where a horse dies.

Two year olds are therefore subject to specific and significant risks associated with the commencement of their racing careers which can be reduced somewhat by limiting injuries sustained and illnesses contracted. The financial impact on owners of two year olds from the death of their horses can be minimised through the use of mortality insurance.

For more information on this subject, please contact Kingsley Edwards of the Bloodstock Insurance Division at Gow-Gates on (02) 8836 1140 or kedwards@gowgates.com.au.

Disclaimer: The information in the above article is intended as a guide only and should not be relied upon without seeking independent professional advice.

BOBS & BOBS EXTRA UPDATE

The first BOBS Extra bonuses were won in August – a total of 10 and each with a cash value of $5000. It may seem like a slow start but BOBS Extra will build over the next few years to be a very valuable contributor to covering owners’ costs.

Two of the 10 wins came in maiden events. We know that many racehorses mature more slowly than others and are not seen at their best till they’re past their juvenile years. If you’re an owner who’s been patient enough to stick with your galloper while it contests maiden races as a 4-year-old, then you’ll certainly appreciate a BOBS extra bonus being added to that first winner’s payout!

As we started to close the books on entries for BOBS 2010 it was gratifying to see that 32% of the horses nominated had been put forward for BOBS Extra as well as for BOBS. That’s the same percentage as for BOBS 2009, so increasingly it will be worth it to keep horses racing longer and competing over distances of 1600 metres and beyond.

The total number of horses nominated for BOBS this year was down by about 10% and that mirrors a corresponding fall in the NSW foal crop in 2008 – the result of the economic downturn and the EI outbreak in the 2007 breeding season.

Available now – free of charge – is the Racing NSW BOBS 2013 Sire Guide. It’s a full colour publication, with 48 pages listing stallions enrolled in BOBS for the current breeding season, and also aiming to answer every question you may have on BOBS, BOBS Extra, BOBS Double-Up and the way the scheme works.

Just drop us an email bobs@racingnsw.com.au and we’ll mail a copy to you.

For further information please contact:
John Gatfield,
BOBS Executive Officer,
Racing NSW,
(02) 9551-7574,
jgatfield@racingnsw.com.au

THE CARRAZZO TAX FILE - SELLING RACEHORSES - FAQs

Thoroughbred Racing and Breeding is not a pursuit for the faint hearted, we all know that.

However, if we are fortunate enough to sell THAT horse, in my opinion (with just a hint of bias) the first thing we should know is: What are the tax implications?

This aspect of racehorse ownership is very underestimated, especially for hobbyists, given that there as there is so much “pub talk” out there along the lines that “you don’t pay tax when you sell a racehorse”. You are soon to learn that this is not always the case.

Acknowledging the confusion in the horse world as to the tax implications of selling horses, I’ve put together an article addressing the most frequently asked questions in this area. After a read, I hope many of the queries you have in this area can now be put to rest.

This article is designed to handle various selling scenarios, in terms of hobbyists, tax businesses, racehorses and breeding stock so I hope that there is something for everyone.

1. Sale of racehorses and FAQs

Q1. I am a hobby racehorse owner and have just sold my 1/6th share in a promising racehorse for $50,000, do I pay tax?

Answer

The first question to ask is “how much did your share cost”?

A racehorse is designated by the ATO to be a “Personal Use Asset” (PUA) and, as such, we must refer to the tax rules relating to this class of asset. Under the PUA rules, an asset acquired for $10,000 or less (including GST) is exempt from capital gains tax (CGT).

Accordingly, if the share in this racehorse cost $10,000 or less, there would be no CGT to pay on the sale of this horse. If the share cost did not meet this exemption, the horse would be subject to CGT.

Q2. How do I calculate the capital gain I just realised on the sale of my hobby racehorse?

Answer

If the horse is subject to CGT, the gain is calculated by deducting from the sale proceeds the relevant “cost base” elements, being:

  • First element: the cost of acquiring the asset (e.g. purchase price)
  • Second element: incidental costs on acquisition and disposal (e.g. commission, legals etc)
  • Fourth element: capital expenditure increasing or preserving the value of the asset or of installing or moving the asset (e.g. training)
  • Fifth element: capital expenditure to establish, preserve or defend title

The third element, being “costs of owning the asset” are not available to Personal Use Assets, hence racehorses miss out. Items such as agistment are therefore excluded if third element costs are not available.

Furthermore, a capital gain is reduced by 50% if the horse was held for greater than 12 months.

Q3. What rate of tax do I pay on a horse capital gain?

Answer

The general rules apply for taxing capital gains, i.e. they are taxed at the normal marginal tax rate of the owner.

If the horse gain is subject to the 50% CGT General discount, this marginal rate is effectively halved. For those on the highest tax rate, this means a tax rate of 22.5% (50% @ 45%).

Q4. What if I make a capital loss on the sale of my racehorse?

Answer

Bad news – capital losses are not recognised on the sale of racehorses, thus only “non-horse” capital losses can be used to offset and reduce any capital gain on the sale of a racehorse. For example, a capital loss on the sale of a rental property can be used to offset the gain on the sale of a racehorse.

Q5. Can a capital gain on the sale of a racehorse be subject to the generous CGT Small Business Concessions?

Answer

Unfortunately no – a racehorse is not an “active asset” used in a taxation business, thus it fails one of the basic criteria.

Q6. Do I have to charge GST on the sale of my hobby racehorse?

Answer

Most “hobbyists” cannot meet the basic GST registration test, i.e. carrying on an “enterprise”, thus the answer is generally no.

Q7. I was gifted a racehorse by a close family member, do I pay CGT when I sell the horse?

Answer

Though the family member paid nothing for the horse, under the CGT deeming rules, the horse is acquired by the family member for its market value.If it can be argued that the market value of the racehorse interest at the time of gifting is in excess of $10,000 that horse is potentially subject to CGT on sale (see Q1. above), otherwise the horse is exempt from tax upon sale.

Q8. I am a hobby breeder and prefer to breed my own horses for racing. If I spend less $10,000 or less on my service fee to breed a particular horse, is the horse exempt from CGT on sale?

Answer

If the intention was to breed the horse for racing, yes that racehorse would be exempt from CGT on sale.

N.B. If the intention was to breed that horse for sale, it is likely that the horse would be subject to CGT, regardless of the service fee paid being less than $10,000. Some good news - foals sold with this “profit purpose” at least have the benefit of third element cost base items being included in the cost base, e.g. agistment.

2. Sale of breeding stock and FAQs

Q9. I sell my hobby broodmare, used originally for racing. Do I pay CGT on the sale?

Answer

If her cost as a yearling was $10,000 (inc. GST) or less, there will be no CGT upon sale. If she cost more than $10,000, yes, CGT applies.

Q10. Would the answer to Q9 above be any different if the mare was sold “in-foal”?

Answer

No, only the cost of the mare (first element) is taken into account for the purpose of the “$10,000” rule. The cost of the service fee re the stallion she is carrying to has no effect on her CGT cost base in this scenario.

N.B. The sale of a mare with a “foal at foot” is seen by the ATO as being the “one asset” and it is only the cost of the mare that is taken into account if determining whether the sale is subject to CGT. Thus, if the mare cost was less than $10,000, the sale of the mare and foal would be exempt from CGT.

Q11. What is the cost base of a hobby mare sold “in-foal”?

Answer

Assuming the mare is subject to CGT, the cost base includes the cost of the mare, the cost of the service fee and the items listed at Q2 above.

Q12. What are the tax implications of “pin-hooking” weanlings?

Answer

These horses are acquired and sold for a definite profit making purpose, thus it is highly likely that any capital gain would be subject to taxation, regardless of the cost of these weanlings.

It is unlikely that the weanlings would attract the 50% CGT discount, given that weanlings are turned over as yearlings generally within 12 months of purchase.

Q13. What are the tax implications of selling stock within my integrated business of racing and breeding?

Answer

To date, we have only been dealing with mares, foals, racehorses etc sold by hobbyists.

If a tax business sells any horse, the tax profit is the sale proceeds (excl.GST) less the tax carrying value of the stock. Furthermore, the sale has no relevance to CGT and thus the 50% CGT discount does not apply.

You are welcome to contact me if you wish me to clarify or expand upon any of the matters raised in this article.

Prepared by:

PAUL CARRAZZO CPA
CARRAZZO CONSULTING CPAs

22 BLACKWOOD ST, NORTH MELBOURNE VIC 3051
TEL: (03) 9329 7044
FAX: (03) 9329 8355
MOB: (0417) 549 347
E-mail: paul.carrazzo@carrazzo.com.au
Web Site: www.carrazzo.com.au

DISCLAIMER: Any reader intending to apply the information in this article to practical circumstances should independently verify their interpretation and the information’s applicability to their particular circumstances with an accountant specialising in this area.

CONTACT DETAILS FOR MEMBERS

Have you recently moved, changed your postal address or obtained an email address? If so, it would be greatly appreciated if you could contact the office in order for our records to be updated.

Yours in Racing
Ray McDowell, President
13 September 2010

STOP PRESS:
MATTHEW TALBOT HOMELESS SERVICES RACE DAY
– 16 OCTOBER 2010

Matthew Talbot Homeless Services will be conducting a Race Day Luncheon at Royal Randwick Racecourse on 16 October 2010, Caulfield Cup Day.

This year’s Race Day will raise funds to support Matthew Talbot Homeless Services who assist men, women and children who are homeless with many suffering mental illness or escaping violence.

Tickets are priced at $150 per person of $1,500 for a table of 10.

For more information or bookings visit the website www.vinnies.org.au or phone (02) 9568 0243.

 

NSW Racehorse Owners Association • GPO Box 1506, SYDNEY NSW 2001
Ph: 9299 4299 • Fax: 9299 3212 • E: nswroa1@ozemail.com.au • W: www.nswroa.com.au